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Are These 5 Beverage Stocks Poised for Earnings Beat This Season?
Zacks Equity Research
9 min read

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With the fourth-quarter 2024 earnings season in full swing, we are expected to witness earnings releases from many companies in the beverage space. The beverage industry, which comprises the alcohol and soft drink categories, falls under the broader Zacks Consumer Staples sector. Notably, the sector now ranks among the bottom 38% of the overall Zacks classified sectors.

With nearly 80% of companies having reported their fourth-quarter 2024 earnings this reporting cycle, we will focus on the earnings scorecard of the Consumer Staples sector. Per the latest Zacks Earnings Trends, nearly 80.6% of Consumer Staples companies have reported earnings so far, constituting 92.6% of the total market capitalization. Earnings for the sector have improved 3.6% year over year, on a 0.8% increase in revenues. Of the companies that have already reported, 48% beat on both earnings and revenues.

Per the report, the Consumer Staples sector’s December-quarter earnings are expected to grow 2.8% year over year, with revenues rising 0.9%. Margins for the sector are also likely to edge up 0.2% for the fourth quarter of 2024.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Factors Likely to Impact Beverage Stocks’ Earnings Results

The beverage industry is expected to have experienced notable gains from immense strength in brands, pricing actions, and significant innovations and product launches. The expansion initiatives of the companies in the beverage industry, including foray into variants like energy and sports hydration along with effective in-market execution and growth in carbonated soft drinks, are likely to have acted as positives. 

Soft drink companies have been further focused on launching products for health-conscious consumers, with a shift toward beverages with natural ingredients and lower sugar content as well as prebiotic soda and functional beverages. Also, the plant-based and functional beverage categories have been gaining traction, as consumers seek alternatives to traditional soft drinks. 

Within the alcohol space, we note that players have been benefiting from higher demand for premium and high-end products, along with a shift toward craft spirits with low or no alcohol content.

In addition, beverage companies are expected to have reaped the benefits of digital and technology-driven investments. Companies in the industry have been ramping up investments to build robust digital capabilities, evolving to execute marketing and boosting fulfillment and distribution capabilities. These are likely to have bolstered the companies’ performances in the upcoming releases.

However, players in the beverage industry are not immune to commodity cost inflation and other operating pressures. In addition, higher advertising and marketing investments, and increased operating costs are likely to have contributed to reduced margins and pulled down profits of the beverage companies. Supply-chain bottlenecks, elevated transportation costs, strict regulatory compliances, evolving consumer patterns on health-related concerns and global market complexities including adverse currency translations are likely to have added up to other challenges. 

All in all, we have mixed views about the earnings outcomes of companies in the beverage industry. That said, let us take a look at five beverage stocks, which are scheduled to report results this week. Our research shows that for stocks with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), the chance of a positive earnings surprise is high. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

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